March 18, 2013

Balancing Compliance and Conversation

Here's a mashup of findings from two separate studies on the social media behavior of banks. According to the first, which looked at the Twitter performance of over 300 U.S. retail banks, almost 22% of the accounts were either dormant or deactivated. About 50% tweeted less than once every 3 days and 1 in 10 managed fewer than 20 tweets over 12 months. The second, a study of 50 leading private banks found that one-third did not even have an active Facebook profile and only half of the remaining two-thirds responded to a test request.

It is generally true that banks haven't quite warmed up to social media like, say, retail or Consumer Packaged Goods industries. Even those that have, do not seem to have progressed beyond tokenism or a passive presence. Regulatory stipulations and the complications involved in enforcing compliance across social platforms have added to the inertia. There's an expertly constructed hypothesis that argues that if snail mail were a new channel today it wouldn't get past any bank's compliance team. So it can hardly be expected of social media to pass muster.

Yet, there are banks, which while conforming to regulatory processes, are constantly breaking new ground in the social space. Look at Alior Bank in Poland. Established in 2008, the bank had acquired over a million customers by the end of 2011. In 2012, the bank launched a new service - Alior Sync - the world's first virtual banking service with online access for staff through videoconferencing including sharing of desktops and documents, along with image transfer from cameras. Alior Sync allows customers to transfer money to friends using Facebook photos or by email. Also, look at Germany's Fidor Bank that allows customers to shape the interest of FidorPay. The rule is simple: The more Facebook Likes, the higher the interest rate. The minimum interest rate of a FidorPay account is 0.5% pa. By the 25th of each month, if the bank achieves a certain number of Likes, then a higher interest is paid. All their services and banking products are Internet-based and designed to be executed through a single e-wallet: the FidorPay-Account. Interaction between users is supported via Fidor Bank´s own community. Currently, more than 55.000 registered community members independently chat about daily financial topics and answer money-related questions. Fidor Bank follows the principles of crowd sourcing for peer to peer advice and rewards activities. Users earn money by asking questions within the community. And for answering questions.

So, really the real elephant in the room isn't compliance but rather the fear of negative evaluations, and a deep-rooted anxiety about social media's power to vilify virally. Hardly surprising, when banks have borne its brunt at every isolated service lapse or attempted fee hike. Clearly, looking the other way won't make it go away. Banks no longer control what customers are saying about them, and the conversations will continue to flow regardless of their participation. However, it's not all gloom and doom. Because where there is brutal word of mouth, there is also powerful advocacy.

Advocacy is one of the key metrics of successful social engagement. Experts say that word-of-mouth influences between 20% and 50% of decisions in general, and significantly more in some sectors. A 2010 study of 7,000 retail banking customers concluded that 50% of those who were considered advocates were willing to try out new products; also, advocates were loyal and more engaged with the bank.

Against this backdrop, the findings of another study by a leading social software and solutions firm, stands out in dark relief. In his blog post, the Vice President of Technology says that typically, a financial services company has less than a tenth of the number of advocates of a telecom firm, and about one-fiftieth that of a media organization. It's a similar story with engagement. Clearly, financial firms are losing out on an important opportunity. After the last crisis, customers have grown even more anxious about financial issues. Banks need to engage them in meaningful discussion - answering queries, resolving issues, allaying concerns - as a first step towards converting them into advocates.

One model for achieving that suggests that organizations start by listening closely to what customers want from social engagement; develop an appropriate strategy for content; identify and reach out to potential influencers; and encourage them to turn into advocates through incentive and empowerment.

Here, we take a closer look at the last bit.

Although few financial service firms have managed to garner consumer advocacy, one can still draw some lessons from their experience. For instance, USAA has a transparent rating system enabling customers to rate their products. The results are put up on their website for all to see. There are buttons to enable members syndicate content and freely spread the word in social media, and a member to member service to allow advocates address other customers' negative feedback. Only members may write reviews, which are moderated in accordance with clear, transparent guidelines.

Let's distil this into a framework that other banks may apply to use one social media tool, namely ratings, to build engagement and advocacy.

• Find suitable technology; there's plenty to choose from, and much of it is available on the cloud.

• Although many solutions offer moderation services, it is better that your bank drafts its own review-related policies and processes.

• Establish immediacy by asking for ratings as soon as a customer makes a purchase or experiences a service. You might like to encourage this with a small incentive.

• Publish the reviews for the public to see, ideally once there's a reasonable number. Similarly, put up your moderation policy in clear, unambiguous terms.

• Don't respond to negative feedback in public; instead do it offline. There's no way that your bank will look good in a public argument, even if in the right. The best way is to let other customers respond.

• Thank customers for their opinion, and show them that you are listening.